Question 1

Bank reserves include I. the cash in the bank's vault
II) the bank's deposits at the Federal Reserve

Accepted Answer

A)  only I 
B)  only II 
C)  both I and II 
D)  neither I nor II 
A)  only I 
B)  only II 
C)  both I and II 
D)  neither I nor II

Question 2

Barter occurs when you exchange

Accepted Answer

A)  money for goods. 
B)  goods for money. 
C)  goods for other goods. 
D)  one money, such as U.S. dollars, for another money, such as Japanese yen. 
A)  money for goods. 
B)  goods for money. 
C)  goods for other goods. 
D)  one money, such as U.S. dollars, for another money, such as Japanese yen.

Question 3

According to the quantity theory of money,inflation causes an increase in the money supply.

Accepted Answer

A) True 
 B)False

Question 4

Barter is

Accepted Answer

A)  another type of money. 
B)  printing too much money. 
C)  the exchange of goods and services directly for other goods and services. 
D)  the exchange of goods and services for any type of money. 
A)  another type of money. 
B)  printing too much money. 
C)  the exchange of goods and services directly for other goods and services. 
D)  the exchange of goods and services for any type of money.

Question 5

Which of the following is part of M2?

Accepted Answer

A)  checks 
B)  credit cards 
C)  currency held inside a bank 
D)  none of these are part of M1 or M2 
A)  checks 
B)  credit cards 
C)  currency held inside a bank 
D)  none of these are part of M1 or M2

Question 6

An open market purchase of securities by the Fed

Accepted Answer

A)  increases banks' reserves and decreases banks' securities. 
B)  decreases banks' reserves and increases banks' securities. 
C)  decreases banks' total assets. 
D)  involves a bank purchasing government securities from the Fed. 
A)  increases banks' reserves and decreases banks' securities. 
B)  decreases banks' reserves and increases banks' securities. 
C)  decreases banks' total assets. 
D)  involves a bank purchasing government securities from the Fed.

Question 7

Reserve requirements are the

Accepted Answer

A)  minimum percentages of deposits that banks must hold as reserves. 
B)  minimum amount of an owner's financial resources that must be placed in a depository institution. 
C)  rules covering the types of deposits that banks may offer. 
D)  rules covering the types of assets that banks may purchase. 
A)  minimum percentages of deposits that banks must hold as reserves. 
B)  minimum amount of an owner's financial resources that must be placed in a depository institution. 
C)  rules covering the types of deposits that banks may offer. 
D)  rules covering the types of assets that banks may purchase.

Question 8

When the Fed is ________ it is ________.

Accepted Answer

A)  adjusting the amount of money in circulation; issuing government bonds 
B)  issuing government bonds; conducting monetary policy 
C)  adjusting the amount of money in circulation; conducting monetary policy 
D)  regulating the nation's financial institutions; conducting monetary policy 
A)  adjusting the amount of money in circulation; issuing government bonds 
B)  issuing government bonds; conducting monetary policy 
C)  adjusting the amount of money in circulation; conducting monetary policy 
D)  regulating the nation's financial institutions; conducting monetary policy

Question 9

Suppose that M = 300,P = 150,and Y = 6.Then the velocity of circulation equals

Accepted Answer

A)  0.02. 
B)  0.50. 
C)  2.00. 
D)  3.00. 
A)  0.02. 
B)  0.50. 
C)  2.00. 
D)  3.00.

Question 10

Which of the following is an example of money functioning as a unit of account?

Accepted Answer

A)  Bank of America charging 7 percent on an auto loan. 
B)  Pepsi charging $1 for a can of soda. 
C)  eBay using PayPal as a method of payment. 
D)  Your writing a check at Target to pay for new clothes. 
A)  Bank of America charging 7 percent on an auto loan. 
B)  Pepsi charging $1 for a can of soda. 
C)  eBay using PayPal as a method of payment. 
D)  Your writing a check at Target to pay for new clothes.

Question 11

$\begin{array}{|l|l|}
\hline {\text { Assets }} &{\text { Liabilities }} \
\hline \text { Reserves } & \
\$ 400 & \text { Deposits } \
\text { Loans } & \$ 1,200 \
\$ 800 & \
\text { Total } & \text { Total } \
\$ 1,200 & \$ 1,200\
\hline 
\end{array}$ 
-In the balance sheet above,the entries are in millions of dollars for the FBN Bank.If the desired reserve ratio equals 10 percent,FBN Bank has excess reserves of

Accepted Answer

A)  $280 million. 
B)  $200 million. 
C)  $100 million. 
D)  $0. 
A)  $280 million. 
B)  $200 million. 
C)  $100 million. 
D)  $0.

Question 12

When the Fed conducts an open market operation by purchasing securities from a bank,________.

Accepted Answer

A)  public holdings of securities increase 
B)  the bank's deposits increase but its reserves do not change 
C)  the bank's deposits increase but its reserves decrease 
D)  the bank's reserves increase 
A)  public holdings of securities increase 
B)  the bank's deposits increase but its reserves do not change 
C)  the bank's deposits increase but its reserves decrease 
D)  the bank's reserves increase

Question 13

U.S.currency ________.

Accepted Answer

A)  is less efficient than barter 
B)  includes tobacco 
C)  is the sum of M1 and M2 
D)  is composed of the bills and coins that we use today 
A)  is less efficient than barter 
B)  includes tobacco 
C)  is the sum of M1 and M2 
D)  is composed of the bills and coins that we use today

Question 14

When real GDP increases,the demand for money

Accepted Answer

A)  increases. 
B)  decreases. 
C)  stays the same. 
D)  we cannot make a prediction without additional information. 
A)  increases. 
B)  decreases. 
C)  stays the same. 
D)  we cannot make a prediction without additional information.

Question 15

If an economy has a velocity of circulation of 3,then

Accepted Answer

A)  the quantity of money is 3 times real GDP. 
B)  in a year the average dollar is exchanged 3 times to purchase goods and services in GDP. 
C)  nominal GDP is 1/3 the size of the quantity of money. 
D)  the quantity of money is $3 for every dollar of GDP. 
A)  the quantity of money is 3 times real GDP. 
B)  in a year the average dollar is exchanged 3 times to purchase goods and services in GDP. 
C)  nominal GDP is 1/3 the size of the quantity of money. 
D)  the quantity of money is $3 for every dollar of GDP.

Question 16

Suppose the equilibrium interest rate in the money market is 5 percent and the current interest rate is 7 percent.As a result,

Accepted Answer

A)  the interest rate rises. 
B)  real GDP increases. 
C)  the demand for money curve shifts rightward. 
D)  people buy bonds and the interest rate falls. 
A)  the interest rate rises. 
B)  real GDP increases. 
C)  the demand for money curve shifts rightward. 
D)  people buy bonds and the interest rate falls.

Question 17

Which of the following is the most liquid?

Accepted Answer

A)  the U.S. dollars in your pocket 
B)  the funds in your checking account 
C)  your house 
D)  your friend's house 
A)  the U.S. dollars in your pocket 
B)  the funds in your checking account 
C)  your house 
D)  your friend's house

Question 18

Does the Federal Reserve conduct both the nation's monetary policy and its fiscal policy?

Accepted Answer

The Federal Reserve does not c

Question 19

Which of the following institutions is NOT a depository institution?

Accepted Answer

A)  the U.S. Treasury 
B)  a commercial bank 
C)  a money market mutual fund 
D)  a thrift institution, such as a savings and loan association 
A)  the U.S. Treasury 
B)  a commercial bank 
C)  a money market mutual fund 
D)  a thrift institution, such as a savings and loan association

Question 20

In the money market,if the interest rate exceeds the equilibrium interest,there is a surplus of money. How is the surplus eliminated?

Accepted Answer

A)  People buy bonds to rid themselves of the surplus money, bidding up their price and pushing interest rates down. 
B)  Banks will lend out the surplus, lowering interest rates. 
C)  The Federal Reserve will destroy currency, reducing the quantity of money. 
D)  The high interest rate increases the demand for money, eliminating the surplus. 
A)  People buy bonds to rid themselves of the surplus money, bidding up their price and pushing interest rates down. 
B)  Banks will lend out the surplus, lowering interest rates. 
C)  The Federal Reserve will destroy currency, reducing the quantity of money. 
D)  The high interest rate increases the demand for money, eliminating the surplus.

Bank reserves include I. the cash in the bank's vault II) the bank's deposits at the Federal Reserve

Barter occurs when you exchange

According to the quantity theory of money,inflation causes an increase in the money supply.

Barter is

Which of the following is part of M2?

An open market purchase of securities by the Fed

Reserve requirements are the

When the Fed is it is .

Suppose that M = 300,P = 150,and Y = 6.Then the velocity of circulation equals

Which of the following is an example of money functioning as a unit of account?

Assets Liabilities Reserves \ 400 Deposits Loans \ 1,200 \ 800 Total Total \ 1,200 \ 1,200 -In the balance sheet above,the entries are in millions of dollars for the FBN Bank.If the desired reserve ratio equals 10 percent,FBN Bank has excess reserves of

When the Fed conducts an open market operation by purchasing securities from a bank,________.

U.S.currency ________.

When real GDP increases,the demand for money

If an economy has a velocity of circulation of 3,then

Suppose the equilibrium interest rate in the money market is 5 percent and the current interest rate is 7 percent.As a result,

Which of the following is the most liquid?

Does the Federal Reserve conduct both the nation's monetary policy and its fiscal policy?

Which of the following institutions is NOT a depository institution?

In the money market,if the interest rate exceeds the equilibrium interest,there is a surplus of money. How is the surplus eliminated?

What Is Economics

The Economic Problem

Demand and Supply

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

Inflation, Jobs, and the Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Introduction

Monitoring Macroeconomic Performance

Macroeconomic Trends

Macroeconomic Fluctuations

Macroeconomic Policy

Filters

Exam 8: Money, The Price Level, and Inflation

Bank reserves include I. the cash in the bank's vault II) the bank's deposits at the Federal Reserve

Barter occurs when you exchange

According to the quantity theory of money,inflation causes an increase in the money supply.

Barter is

Which of the following is part of M2?

An open market purchase of securities by the Fed

Reserve requirements are the

When the Fed is ________ it is ________.

Suppose that M = 300,P = 150,and Y = 6.Then the velocity of circulation equals

Which of the following is an example of money functioning as a unit of account?

Assets Liabilities Reserves \ 400 Deposits Loans \ 1,200 \ 800 Total Total \ 1,200 \ 1,200 -In the balance sheet above,the entries are in millions of dollars for the FBN Bank.If the desired reserve ratio equals 10 percent,FBN Bank has excess reserves of

When the Fed conducts an open market operation by purchasing securities from a bank,________.

U.S.currency ________.

When real GDP increases,the demand for money

If an economy has a velocity of circulation of 3,then

Suppose the equilibrium interest rate in the money market is 5 percent and the current interest rate is 7 percent.As a result,

Which of the following is the most liquid?

Does the Federal Reserve conduct both the nation's monetary policy and its fiscal policy?

Which of the following institutions is NOT a depository institution?

In the money market,if the interest rate exceeds the equilibrium interest,there is a surplus of money. How is the surplus eliminated?

What Is Economics

The Economic Problem

Demand and Supply

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

Inflation, Jobs, and the Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Introduction

Monitoring Macroeconomic Performance

Macroeconomic Trends

Macroeconomic Fluctuations

Macroeconomic Policy

Filters

When the Fed is it is .